Convergence Dynamics Across International Securitized Real Estate Markets

Abstract

With a sample of 14 developed real estate securities markets during the study period 1993-2008, the main objective of this paper is to investigate market integration using the concepts of risk-return convergence and beta convergence. We find that international developed real estate securities markets have been moving toward greater integration in terms of increasing correlation and faster speed of convergence in returns and volatilities. However, the finding of an insignificant risk-return convergence trend also implies that the risk and return characteristics of the real estate securities markets have not become less different from each other over the study period, supporting the view that the idiosyncratic “real estate factor” and “country factor” of individual markets might have become more important over time.